A relatively calm moment during SXSW Interactive last year. For 2012, attendees should expect more than 20,000 people and an almost countless number of marketers vying for their attention.
Caroline McCarthy/CNET

More than 20,000 people will roll into Austin, Texas, this week for the annual South by Southwest Interactive festival. The question is, besides copious amounts of free beer and barbecue, why are all those people--a broad mix of marketers, entrepreneurs, journalists, and social media junkies--showing up?

Over the years, SXSW has gotten bigger and has morphed from being an insular technology conference with a tight community of regular attendees to a mainstream event that appeals to everyone from those SXSW veterans to thousands of first-timers who want to get in on the action.

With that many people on hand for what is arguably the most important interactive conference in the world, there's no simple answer. But conversations with a series of veteran attendees, marketers, and entrepreneurs paint a picture of the biggest reasons many of those people are converging on the Texas capital.

This year, for the first time, SXSW will feature what's being called the "Startup Village," a merger of "startups, entrepreneurs, investors, and cutting-edge digital tastemakers" with the main Interactive festival. The idea, said SXSW Interactive director Hugh Forrest, is to centralize most of the startup activity in one place and to leverage the interest in new companies that has exploded over the last few years.

For SXSW, that interest has intensified since 2007, when Twitter exploded onto the scene during that year's event, and since 2009, when both Foursquare and Gowalla blew up while in Austin. Now, every young social media startup wants to repeat those companies' success, and wants to use SXSW as the springboard to billions of dollars in market capitalization.

The leading candidates to wow SXSW attendees this week may well be the people discovery applications Highlight and Glancee, both of which have the opportunity to make major waves with the digerati in Austin, a community that could then bring the apps back home with them and evangelize them to the world.

But regardless of who it is, there's only room for a few major success stories each year at SXSW. So what about everyone else who won't walk away with thousands of passionate new users? What's their rationale for being there?

Real-life connections
For the uninitiated, South by Southwest can be utterly daunting. Last year, there were 19,364 attendees and 935 official sessions, and those numbers should be no less intimidating this year. Keynotes and major talks dot the daily schedule, with geek favorites like futurists Ray Kurzweil and Bruce Sterling, comedian Baratunde Thurston, "Buffy the Vampire Slayer" writer Joss Whedon, PostSecret founder Frank Warren, and many others topping the bill. That's on top of countless panels and parties--both official and unofficial--meetups, impromptu wine gatherings, and much more. Not to mention kickball, skeet shooting, and an array of other Texas fun.

In short, there's a little bit of everything, and a little something for everyone.

"It's like the parable about the elephant," said Forrest. "You see what you want to. If you want it to be corporations and marketing, you can see that. But if you want to see it as an event for non-profits doing technology, we have 50 to 100 panels on that. We've always wanted it to be a big tent. It's just gotten to be a slightly bigger tent."

But while keynotes, panels, parties, and BBQ are all fun, they don't tend to justify the time and cost of traveling to Austin for several days. For many on hand, whether longtime veterans or newbies unsure how to navigate SXSW, it's about professional development and bridging the gaps between virtual relationships and real-life connections.

"More than anything, it's about turning a [virtual] follower into an in real life connection," said Gregory Galant, the CEO of Sawhorse Media, of why he attends SXSW. "We get to know [virtual connections] as well as we can, but there's nothing that beats meeting somebody in real life, and sharing a beer, and getting people's thoughts off the record when they're out of their element."

Indeed, amidst the endless marketing messages, panels, and so forth, SXSW remains at its heart a networking event where the most active members of the digerati find themselves in one small area of Austin over the course of several days. "The technology industry has Silicon Valley, and the financial industry has Wall Street," said Kent Hollenbeck, senior vice president of global corporate communications at public relations giant Waggener Edstrom. For the interactive community, "it doesn't have a city, or a center of the universe. Except this one week of the year" in Austin.

And what better place to build the new relationships that can perhaps lead to future business--especially when it's unplanned.

"The first year I went...I bought a badge and attended sessions," recalled Rebecca Reeve, who runs Rsquared Communication. "It was already quite large, rooms were full by the time I arrived...At one of the interactive sessions, about 50 people showed up for 20 seats, and I ended up meeting several people sitting on the floor that I still keep in touch with today."

Making your mark
One thing that's clear is that there will be countless companies vying for the attention of the thousands of people walking around downtown Austin. And with that much noise, it can be extremely difficult to separate from the rest of the pack.

There seems to be two ways to go about that. One, of course, is to make a kick-ass application that everyone wants to use. That's how Twitter made its mark at SXSW 2007, despite the legend that the company spent just $10,000 to promote itself in Austin.

Another way is to do something very clever to get yourself noticed. As Forrest noted, Foursquare co-founder Dennis Crowley helped his young company get on everyone's radar by setting up an actual foursquare court right in front of one of the main entrances to the Austin Convention Center during SXSW 2009. "There's a degree of unusualness, thinking outside the box, but also a degree of authenticity" that can elevate a company at SXSW, Forrest said. "Who knows if Foursquare had the money in 2009 to put billboards all over town...but it was much more authentic to [join the foursquare game] and say, 'I can meet that guy'" in person.

The reality is that these days, there's so many companies trying to get noticed at SXSW that even the best of the best may have to pull some sort of marketing genius out of their hat to get on people's radars. Especially when a company like Apple surprises everyone by stealing the show, like it did a year ago with its pop-up iPad store. Regardless, though, the number that succeed at leaving Austin having become household names in the interactive community will be very small.

Another challenge for the startups trying to get noticed this week is the flash and glam that will be put on by the huge marketers in town, the Pepsis and General Motors that will dole out the big bucks for giant displays and gimmicks like free rides for all. As my former CNET colleague Caroline McCarthy wrote last year, that's just something underfunded entrepreneurs will have to deal with.

"If marketers want to pump money into an annual weeklong nerd party in Austin, they'll do it whether bloggers are whining about it or not," McCarthy wrote. "Start-ups hoping to launch at the festival will have to realize that they'll be surrounded not only by the presences of huge brands both tech- and non-tech but also by other start-ups looking to do exactly the same thing that they are. They'll have to change their tactics accordingly.

"The way that we look at big marketing dollars is we understand that we don't have the budgets to go up against a Foursquare or a Pepsi," Ryan Kuder, vice president of marketing at local recommendations start-up Bizzy, told McCarthy. "One option was 'go big.' Another option was 'go small.' We went with 'go small' because placing really large bets at this point in a startup's life cycle--if you lose the pain is a lot greater."

But facing those challenges doesn't mean that companies and individuals shouldn't come to Austin, or that those who don't break through should feel their time is wasted. Instead, longtime veterans suggest that the best way to come away successful is to be realistic about goals, and to be willing to let the unexpected happen.

"I don't try [to find people at SXSW]," said Molly Steenson, a 14-year veteran. "I find a couple of people and I stay in the orbit of those people."

The important thing, Steenson and others said, is to stay away from the temptation to overplan, or to rely on mobile devices as the keys to SXSW planning . "I feel sorry for the people who look down at their iPhones and Androids," Steenson said. "That's the fun part--paying attention to what's in front of you and what's serendipitous."

Steenson also suggested that those who want to get the most out of their time in Austin should avoid sticking with the crowds. "Spend time peeling off from huge parties," she said. "Hotel bars are great places to have conversations. Don't spend all of your time in a velvet rope line to get into [a party]. Go places where you can have a conversation and hear people speak. [And] don't spend all your time trying to find your friends on Foursquare. Meet the people in front of you. That's the best part."